If you’re a CEO, then when it comes to ESG and CSR, you’d better mind your Ps and Qs.
This isn’t alphabet soup; these acronyms represent the future of the way all businesses will be judged—by consumers, by employees and potential hires, and by investors.
ESG stands for environmental and social governance, while CSR stands for corporate social responsibility. And these are the new metrics for pretty much everyone in the business world. Executives who fail to monitor and improve their standing in these areas do so at their peril.
What are we talking about? Increasingly, socially minded consumers are only buying products and services from companies whose records regard the environment, fair trade practices, and appropriate hiring and employee practices across race, gender, and sexuality lines.
The new generation of employees increasingly wants to work for such companies. And in the investment community, at a growing ratey, fund managers are putting their dollars into companies that score well in terms of ESG and CSR—$1 of every $4 invested in the U.S. is now invested in a socially responsible way, according to SIF Foundation’s Report on US Sustainable, Responsible and Impact Investing Trends.
This isn’t a “flavor of the month” kind of thing. This is the way of the future, and in fact, the future is already here.
“Increasingly, companies are seeing that people really want to see some kind of mission beyond profit with the companies with which they deal,” says Thomas M. Kostigen, Director of Sustainability at JConnelly, a national communications and marketing firm headquartered in New York. “That could be a consumer walking into a retail store and having a positive experience there, which is enhanced by the fact that that store abides by certain protocols to be environmentally friendly and has a good relationship with the community.
“From a governance standpoint,” Kostigen adds, “consumers want to know how management deal with their employees, and with their board. Is the board comprised of a diverse group of people, including women, minorities, and individuals of different ages and demographics?
And on the financial services side, asset managers are looking at companies that have all these things going on. The companies have protocols that they abide by in order to live up to those standards environmentally, socially, on the philanthropic side, and then from a governance standpoint.”
Kostigen gives examples of three companies who do a great job of maintaining their ESG. First, Patagonia, which he says puts up videos of its entire supply chain on its website, so customers can see exactly how their materials are sourced.
“Patagonia is the gold standard when it comes to ESG,” Kostigen says.
Next comes Pure Water Box, which provides an alternative to plastic bottles. Kostigen gives Pure Water high marks for communicating its commitment to ESG, both for consumers and internally.
“This is a message that you’ve got to share with your team members over and over,” he advises. “It’s not enough to tell your consumers. You have to make it clear to your team members that your commitment is serious and ongoing.”
The third company he admires is British clothier, Selfridges, which Kostigen gives high marks for its consistent commitment to demonstrating how customers actually use the garments they buy there.
“You’ve got to have a really solid, ongoing messaging campaign,” Kostigen says. “Through social media and earned media, to get your message that you take ESG seriously out into the world. In the ‘60s, people used to say ‘the whole world is watching.’ That’s never been truer than today, and that’s never been truer with regards to how companies conduct themselves in terms of the environment and social behaviors.
“This isn’t just a box to be checked. If you want to succeed today, this is something you have to get right, and you have to communicate it well over and over again.”